EconAir

September 16, 2026:     A Day in the Life of a Retired Finance Professor The Fed raises the Fed funds rate for the first time since 2023. This will raise most short-term interest rates, in response to a rising inflation rate. President Trump is not pleased. European countries are pulling central bank gold out of the Fed’s gold vault in New York. Gold is slowly replacing the dollar as a central bank reserve asset. (Personal note:  Many years ago I was in a small group given a tour of the NY Fed that included going into the Fed's gold vault. As we entered, the guide said "Don't even think about it.") Many countries are exploring and implementing ways not to use the dollar in international transactions. One method is to use central bank digital currencies to settle international trade payments instead of the dollar. Scott Bessent, the U.S. Secretary of the Treasury, announces a government buy-back of a small amount of U.S. 10-year Treasuries ($4-$6 billion) to lower long...

THE ECONOMICS OF FINANCIAL MARKETS MARKET-MAKERS, BIASED INFORMATION, AND FORECASTS This tutorial will look at financial markets and how they actually function.  There are two general theories about how financial markets work. The first is the Efficient Market Theory, which assumes all decision-makers are rational – they have access to information, can analyze it, and make investment decisions. Strangely, a major conclusion is that investors cannot predict stock price movements, which are random. The second is Behavioral Finance, which assumes that investors are irrational – they have a number of biases and are influenced by the markets’ past behavior. Both theories based on this supposed distinction that “explain” financial price behavior are irrelevant. What is left out of theoretical models of financial markets is how financial markets actually operate. Between buyers (investors) and sellers (including issuers of new securities), there are market makers like brokerage firms, man...